Economic Consequences of International Financial Reporting Standards

European Journal of Business and Management
ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online)

Vol.5, No.28, 2013
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Economic Consequences of International Financial

Reporting Standards (IFRS) Adoption: Evidence from a
Developing Country
1
1.
2.
2*
Wilson E. Herbert
Ioraver N. Tsegba
Professor of Accounting and Financial Management, Bingham University, Karu, Nasarawa
State, Nigeria
Associate Professor of Accounting and Finance, Federal University of Agriculture, P. M. B. 2373,
Makurdi, Nigeria
*E-mail of the corresponding author: intse2004@yahoo.com
Abstract:
Drawing on extant literature in accounting and financial economics, this study sought to
analyze the economic consequences of the adoption of International Financial Reporting Standards (IFRS) by
Nigeria through an examination of the major obstacles, benefits and attitudes towards its adoption. As an
exploratory study, we drew a sample from the population of Nigerian academics and practitioners who are
familiar with the phenomenon of interest. We examined three research questions on the perceptions of Nigerian
academics and practitioners about IFRS adoption in Nigeria. The hypotheses were tested using frequency
analysis, descriptive statistics, Kruskal-Wallis (K-W) and Chi-square tests. Our findings identified (i) lack of
education, understanding and experience by preparers of financial reports with the use of IFRS; and (ii) lack of
coverage of IFRS in financial accounting/auditing textbooks as the major obstacles towards its adoption in
Nigeria. The results further revealed that: (1) effective IFRS adoption would be valuable to preparers, users,
auditors, analysts, and standard setters; and (2) a proper plan to convert all Nigerian companies to IFRS would
require training for management, auditors, and investors, along with the pipeline incorporation of IFRS
education into accounting curriculum. The policy implication of the studys findings is the urgent need to
integrate IFRS into the accounting curriculum in Nigerias higher education system. It also calls for financial
regulators and professional accountancy bodies to update their IFRS knowledge in order to maintain their
professional competence.
Keywords: Accounting Standards, International Financial Reporting Standards (IFRS), Economic
Consequences, Developing Country, Politics, Lobbying, Nigeria.
1.
Introduction
It has long been an article of faith that the IFRS will not only become a common global accounting and financial
language, but will completely reshape the architecture of financial reporting. Despite the spate of research on
IFRS, the question about the economic consequences of its adoption for developing countries has hardly been
investigated and therefore remains a matter of empirical concern. Because of developing countries quest for
global competitiveness and aspiration to mitigate the prevalence of poverty, diseases, education backwardness
and other indicia of underdevelopment, most of these countries have joined their developed counterparts as a
matter of if you cant beat them, join them. Some countries have simply adopted IFRS as a matter of fulfilling
membership obligation of global bodies such as the World Trade Organization (WTO), global accounting bodies
like the International Federation of Accountants (IFAC) and/or mandated by the World Bank (WB) and
International Monetary Fund (IMF), without evaluating its economic effects in their jurisdictions. This perhaps
explains why the literature on the economic consequences of IFRS adoption is sparse, particularly so in
developing countries (see Lin, 2012).
The IFRS adoption anxiety has become not only crucial but has called for urgent concerted efforts on the part of
all concerned (government, the accountancy profession and the private sector). This urgency derives mainly
from the joining of time constraints given lost time and missed deadlines with the enormous resources
(human and financial) required to ensure a seamless transition. From a historical perspective, the development
of a strong international financial reporting architecture has been of longstanding interest to and has elicited (and
still elicits) frequent commentary from accounting academics and professionals and men of affairs (business
leaders, politicians, labour leaders, and regulators). This perspective is reinforced by the fact that accounting is
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shaped by economic and political forces (Watts, 1977; Watts and Zimmerman, 1986). The key role played by
financial reporting in economic development nationally and globally is a prima facie indication of its impact in
ensuring a strong investor confidence which is vital to the optimal functioning of financial markets and,
consequently, to economic development.
The adoption of IFRS across the world, Nigeria inclusive, represents a watershed in the annals of accounting
development. The globalization of economic activities juxtaposing increasing integration of national economies
and markets has resulted in an increased demand for high quality, internationally comparable financial
information. In the new globalized cum integrated world, companies and investors operate beyond borders with
their boundary spanning capabilities; they have foreign affiliations in various forms. Banks establish foreign
branches and correspondent banking relationships in several countries to service the incremental dimensions of
their growing portfolio of international customers. Foreign companies and their nationals, development partners,
international donor agencies, civil society organizations (CSOs) and non-governmental organizations (NGOs),
all traverse the global space of accounting and finance.
One of the discontents of globalization is the growing inequality between the Western (developed) economies
and developing and less developed countries (DLDCs), whether it is trade and commerce, energy and
environmental policies, or in geopolitics in general. In relation to the geopolitics, most DLDCs are economically
weak due to lack of domestic capacity and weak social and physical infrastructure resulting in low export prices
and significant terms-of-trade decline. Furthermore, the DLDCs as a whole have not done well in organizing
themselves to coordinate substantial policy and negotiating positions or strategy in relation to the discussions
and negotiations of the WTO, IMF, WB as well as other forums (Khor, 2005). Thus, despite the
deepening interdependence between national markets and economies, there is nevertheless an undeniable
underlying reality that the world is constrained by people and economies fractured by strongly held beliefs,
values, feelings, and practices that seem intractable to reconcile. These differences permeate all facets of human
understanding and practices, in which accounting, finance and international business in general are no
exception. Nation states and businesses need to understand and reconcile each others accounting principles
upon which resident companies prepare their financial statements, since it is at least universally acknowledged
that accounting is the language of business. The trajectory of this harmonization journey has been long, windy
and tortuous. The IFRS are a testament to the many years of international harmonization dialogue: they are
boldly designed to guide the accounting profession and business across the world into the global reality,
showing businesses and nation states the simplicity of uniform standards on the other side of the complexity,
st
illuminating insights and skills required to deal with contentious accounting dynamics in the 21 century of
integrated economies and markets.
The transition to a global uniform framework is, therefore, an eloquent authentication of the international
consensus on IFRS as benchmarks for assessment of the financial health of economic entities across the globe.
This consensus is premised on the fact that increasing integration of regional and global markets in the presence
of financial statement comparability influences business decisions in many ways. Since IFRS adoption reflects a
fundamental shift in national as well as global accounting systems and professions, their economic consequences
are bound to evoke a lot of discourse. The dialogue is intended to create greater professional and public
awareness about their dimensions and ramifications in a country. For example, before the European Union
decided on IFRS adoption, it commissioned a lot of research and public discourse with key stakeholders
involving the universities and the accountancy profession across Europe. In the U.S. a lot of research, public
discussions and policy dialogue have been going on preparatory to the countrys adoption in 2014. This spate of
preparation has been absent in most DLDCs, especially Africa. In many DLDCs, it is the national standardsetting bodies that have been involved in limited public engagement and enlightenment campaigns. Their
capacity is severely constrained by lack of funds. In Nigeria, the involvement of Ministries, Departments and
Agencies of Government (MDAs), financial regulatory bodies and large corporate organizations in training
and/or supporting national awareness and seamless transition to this all-important global financial reporting
language has been at best limited and at worst lethargic. Earlier studies, such as Herbert et al. (2013), have
shown that despite adopting IFRS, Nigerias readiness for their implementation was still uncertain and remained
inchoate. Although sketches of empirical attention to IFRS are springing up in Nigeria, these are fundamentally
peripheral: the main issues remain largely unresolved. One particular area requiring systematic inquiry is the
economic consequences of IFRS adoption in Nigeria.
The main purpose of this study is to bridge this gap by assessing the effects of IFRS adoption in a developing
country, Nigeria through a comparative assessment of the perspectives of academics and practitioners regarding
the economic consequences (obstacles and benefits) of IFRS adoption. A related objective is to ascertain the
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attitudes of the respondents towards IFRS adoption. The remainder of this paper is organized as follows: section
2 provides a review of the related literature and the research questions and hypotheses; section 3 articulates the
research methodology; and section 4 presents the results and discussion. Section 5 summarizes and concludes
the paper.
2.
Review of Related Literature
2.1. The Contentious Concern about Economic Consequences

The task of International Accounting Standards Board (IASB) is an arduous one, especially in relation to the
requirement to consider the economic consequences of their decisions. For long, accounting researchers have
been interested in the extent to which external forces - essentially politics - affect accounting standard-setting.
Apart from the literature evidence dating back to the 1970s with the works of Beaver (1973), Rappaport (1977),
Watts (1977), Wyatt (1977), Watts and Zimmerman (1978) and Zeff (1978), a casual observation of the
standard-setting process gives a picture of the influence of politics in the determination of accounting standards.
This view is shared by Gipper et al. (2013). The concern about the economic and social consequences of
accounting standards setting reached a crescendo in the late 1970s that the Financial Accounting Standards
Board (FASB) was obligated to commission research papers on the economic consequences of selected
standards and held a conference devoted to the subject (FASB, 1978). The utility argument of convergence to a
single set of international accounting (as well as international auditing) standards proceeds from the notion that
the world is best served by a common set of standards applicable to all economic entities that provide financial
statements which are reasonably comparable. Ostensibly, without such a common set of standards, each
enterprise could, and would, develop its own theory structure and set of practices, resulting in non-comparability
among economic entities. As promulgated by the IASB, the IFRS constitute generally accepted accounting
principles and dictate acceptable financial accounting and reporting practices.
A close examination of the Conceptual Framework of financial reporting reveals a subtle characterization of the
economic consequences issue. The fundamental purpose of financial reporting, and hence the priority of
standard setters, is to facilitate the decision-making of users of financial reports. Thus, the objective of general
purpose financial reporting is to provide information to users that is useful for making and evaluating decisions
about the allocation of scarce resources. The presumption, therefore, is that the development trajectory
(that is, the standard setting process) of the IFRS as a common global accounting and financial language has
taken economic consequences into sufficient consideration. Nevertheless, the observation of Collett (1993) is apt
that the extent to which standard setters in accounting should be required to take into account the economic
consequences of their decisions remains a difficult and contentious problem.
The historical concern about economic consequences of accounting standards stems from the numerous sources
of pressure on both the standard-setting process and the standards themselves. The most intense and continuous
influence-peddling pressure on accounting standards setting and/or principles comes from the following groups:
large multinational companies, the global big 4 accounting firms, industry associations, governmental agencies,
academics, business leaders, professional accounting organizations, and public opinion. The configuration of
these stakeholder pressure groups has political content or connotation to the extent that the intendment of each
group is to extract or skew the standards to favour its agenda. Clearly the harmonization of different national
accounting standards and the evolutionary process of IFRS could not have been circumscribed by purely
professional considerations; the metrics of eliminating or reducing many of the major differences in accounting
standards ipso facto involves political disentanglement of the political variables as well as their technical
ramifications. This nebulous process was placidly characterized by Choi and Mueller as an endeavour of
conflicts (1984: 470).
In its pristine usage, the term economic consequences referred to the impact of accounting reports on the
wealth positions of preparers/issuers and users of financial information and the decision-making behavior
resulting from that impact. Since the 1960s, the accounting profession, especially from the developed countries
(mainly USA, UK, Canada, Australia, New Zealand, and Japan) has shown concern about the impact of
accounting reports on the decision-making behavior of businesses, investors, creditors, organized trade unions,
governments and government agencies. The rise of economic consequences in the 1970s was a reflection of the
perception that (a) external forces had infiltrated the standard-setting process and (b) the impact of accounting
reports on decision making was the most challenging accounting issue (Zeff, 1978). The term basically
implicates cause and effect relationship. Precisely, with respect to standard-setting, economic consequences are
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about the economic incentives associated with accounting standards or principles which might otherwise
motivate or incentivize pressure groups and therefore give them some leverage over other interest groups.
Because accounting is shaped by not only economic but also political forces (Watts and Zimmerman, 1986), and
because the true preoccupations of the intervening third parties have not always been made clear (Zeff, 1978)
or can altruistic predisposition be thereto assigned, it is conjectural that the IASB had factored the economic
consequences concern in its elaborate due process procedure prior to issuing the IFRS.
As aforementioned, the standards-setting process provides powerful international stakeholder groups
developed economies (especially leading members of IFAC), large multinational companies, the big4 global
accounting firms, large industry associations, governmental agencies, academics, business leaders, and
professional accounting organizations - an opportunity to present considerations beyond technical accounting
(commonly referred to as accounting principles or conceptual issues) to the IASB. This is expected because
accounting information impacts various user groups and stakeholders in diverse ways, with consequences for
wealth transfers among the various groups. To the extent that political considerations overtly or covertly play an
important role in the development of accounting standards, such standards are bound to be subject to
manipulation for the purpose of furthering the prevalent policy of the moment or the stratagems of the pressure
groups. As Zeff (1978) argued, when corporate management began increasing their intervention in the standardsetting process, its true position was not altruistic. Their economic consequences arguments were disguised and
couched in ways that suggested that they were genuinely concerned about unbiased and theoretically sound
accounting measurements. In fact, what it was seeking was to advance its opportunistic proclivity in the
economic consequences of published reports.
Thus, no matter how well intentioned the standards are, if their process is infiltrated by third parties or external
forces whose true intentions are disguised, the issue of economic consequences would inexorably surface.
Critical forces who have historically championed or taken more than a passing interest in international standardsetting or harmonization processes come mainly from: (i) developed market economies, (ii) large multinational
corporations, (iii) multilateral government bodies (such as the OECD, EU, World Bank, IMF, WTO), and the
big4 or 5 accounting firms. The putative interest of these parties, who also make large resource (financial and
material) contribution to the international standard-setting process, is to foster international harmonization and
regional market integration and political unions (like the EU). If their interest is designed to impose uniform
accounting rules in the manner of one size fits all (Ball, 2006), then the standards may suffer an irreplaceable
loss of credibility and uniformity and comparability of financial reporting will also suffer in consequence.
As forcefully asserted by Albrecht (2010), all accounting standards have economic consequences. Several
reasons are adduced to justify that if an accounting standard has no economic consequences, then the standard is
not needed. For example, since financial statements are intended to provide information to investors for making
investment decisions, the decisions resulting therein are themselves economic consequences. Second, since all
human communication is persuasive, accounting information cannot be an exception as there is no such thing as
an unbiased fact. In the same vein, Albrecht posits that there is no such thing as neutrality and objectivity in
either accounting measurements or accounting standards. Furthermore, the actions that corporate executives take
are themselves economic consequences of accounting standards. The economic consequences and the political
nature of accounting standards setting flow from the basics of accounting theory and are justified on the
following grounds (ibid):
1. There is no such thing as universal accounting truth.
2. Accounting standards do not equally benefit all affected parties.
3. Accounting standards all have economic consequences.
4. The caveat in the foregoing is that it is the responsibility of a countrys government to
serve as an appeal court of last resort and adjudicate between economic interests in the
selection of accounting standards.
In general, when external forces hijack/influence, or when non-technical accounting considerations preoccupy
the standard-setting process, or when individuals and groups that had been docile in accounting standard-setting
have begun to show more than a passing interest through their active and powerful intervention in the process,
and when these powerful stakeholder groups begin to invoke arguments that transcend those traditionally
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employed in accounting discussions, these non-technical or political arguments, powerful as they are, evoke
non-trivial connotation with economic and social consequences.
In the light of the foregoing, the implications of the economic consequences argument for IASB have become
pertinent as the expectations of national and multilateral governments, civil society organizations, regulatory
agencies and parliamentary committees, etc. heighten. In short, the society in general expects accounting
standard setters to explicitly take into consideration the possible adverse consequences of proposed accounting
standards. This expectation is now strongest because the anticipated economic and social consequences of
uniform global accounting standards are not only significant and widespread but also have implications for
economic and social policies of national importance. In the absence of documented evidence that the IASB has
studied the possible consequences (as the FASB did in the late 1970s) and that the benefits of IFRS adoption
outweigh the possible adverse consequences, studies of the present kind, however rudimentary, would be a
useful addition to the literature on the phenomenon of interest.
2.2.
Conceptual Framework
International convergence of accounting standards is not a new idea: the concept first arose in the late 1950s in
response to post World War II economic integration and related increases in cross-border capital flows (Nobes,
2006). Initial efforts focused on harmonization which entailed reducing differences among the accounting
principles used in major capital markets around the world. By the 1990s, the notion of harmonization was
replaced by the concept of convergence - the development of a single set of high-quality, international
accounting standards that would be used in at least all major capital markets (ibid).
The need to develop a unified set of accounting standards arose from international differences that curtailed
investment opportunities (IFAC, 2008). Since accounting is affected by its environment, the culture of that
environment contains the most basic value that an individual may hold; it also determines the value system of
accountants. In using cultural differences to explain international differences in behaviour of accountants and in
the nature of accounting practices, Gray (1988) suggests that a country with high uncertainty avoidance and
individualism will be more likely to exhibit conservative measure of income and a preference to limit disclosure
of those closely involved in a business.
Other factors that have contributed to international differences in accounting standards include inflation, tax
method, and the legal system of a country. Jaggie and Low (2000) find, for example that companies in common
law countries have higher level of disclosure. To bridge international differences, the International Accounting
Standards Committee (IASC), was formed in 1973 by ten national professional accountancy bodies in Australia,
Canada, France, Germany, Japan, Mexico, Netherlands, United Kingdom and Ireland, and the United States of
America. Its mission was to formulate and publish, in the public interest, basic standards to be observed in the
presentation of audited accounts and financial statements and to promote their worldwide acceptance. The
meeting of IASC and Financial Accounting Standards Board (FASB) on April 1, 2001 gave the convergence a
new impetus. Since then, the move towards international standards has progressed rapidly and by 2009, the
European Union and over 130 other countries either require or permit the use of IFRS issued by the IASB or a
local variant of them.
The unification of the different accounting standards and the evolutionary changes that led to the development of
IFRS has been a topical issue in the accounting world. Since the early 1970s, various attempts have been made
and are still being made to eliminate or reduce many of the major differences in accounting standards through a
process known as harmonization (Herbert, 2010). Indeed, because of the inherent difficulties at the time,
internationalization of accounting standards was deemed as an endeavour of conflicts (Choi and Mueller,
1984: 470). This conflict is rooted in the process of standard setting which is politically motivated in some
countries and, in others, through the private professional accountancy bodies. These national variations (or nonuniformity) in the process of standard setting inevitably gave rise to the prevalence of different standards in
different countries.
2.2.
A Critique of Uniform Standards of Financial Reporting Under IFRS
That the unbridled enthusiasm for IFRS adoption offers advantages, on the one hand, and poses challenges, on
the other, is a familiar argument about the dynamic forces of international political economy. Balls (2006)
detailed conjectural treatment of the associated pros and cons of uniform financial reporting standards
illuminates this study.
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2.2.1
Positive effects of IFRS
At least five affirmative reliefs flow from adopting uniform reporting standards, the first three relating to
voluntary adoption (i.e., without government fiat), while the remaining two are dictated by regulatory and user
influences (Herbert, 2010). The first affirmative argument, which relates to scale economies, underlies all forms
of uniform contracting: uniform rules need only be introduced once. They constitute a type of public good, in
that the marginal cost of an additional user adopting them is zero, and nobody is disadvantaged by another using
them. The second advantage of uniform standards is the protection they give auditors against managers playing
an opinion shopping game (Ball, 2006). If all auditors are required to enforce the same rules, managers cannot
threaten to shop for an auditor who will give an unqualified opinion on a more favourable rule.
The third argument supporting uniform financial reporting is the potential of eliminating informational
externalities arising from lack of comparability. If firms and/or countries use different accounting standards and
techniques even if unambiguously disclosed to all users they can impose costs on others (in economics
parlance, create negative externalities) due to lack of comparability. To the extent that firms internalize these
effects, it will be advantageous for them to use the same standards as others - IFRS. The fourth advantage
derives from the worldwide support from multinational corporations (MNCs), regulators and users because of
the belief that common standards in the preparation of corporate financial statements will facilitate international
comparability from different countries. Large MNCs operating in multiple jurisdictions would be able to use one
accounting language company-wide and present group financial statements in the same language as their
competitors. The fifth benefit is the belief that in a truly global economy, finance professionals will be more
mobile, and companies will more easily respond to their group human capital needs around the world.
These advantages imply that the IFRS offer some degree of uniformity in accounting standards that is
prospective in a market setting. In addition to the above, direct and indirect advantages of IFRS adoption for
investors have been isolated. Direct advantages to investors include:
a) IFRS promise more accurate, comprehensive and timely financial statement information, relative to the
national standards they replace for public financial reporting in most of the countries adopting them. To the
extent that financial statement information is derived from IFRS sources, this should lead to more-informed
valuation in the equity markets, and hence lower risk to investors.
b)
Small investors are less likely than investment professionals to anticipate financial statement information
from other sources. Improving financial reporting quality through uniform standards allows them to
compete better with professionals, and hence reduces the risk of adverse selection through a betterinformed professional (known as adverse selection) (Diamond and Verrecchia, 1991; Leuz and Verrecchia,
2000).
c)
By eliminating many international differences in accounting standards, and standardizing reporting formats,
IFRS eliminate many of the adjustments analysts historically make in order to make companies financials
more comparable internationally. IFRS adoption has the potential to reduce the cost of processing financial
information. The gain would be greatest for institutions that create large, standardized-format financial
databases.
d) Reducing the cost of processing financial information will most likely increase market efficiency, that is, the
efficiency with which the stock market incorporates it in prices. Investors are expected to gain from
increased market efficiency.
e)
Reducing international differences in accounting standards assists to some degree in removing barriers to
cross-border acquisitions and divestitures, which in theory will reward investors with increased takeover
premiums (See Bradley et al., 1988).
In addition, IFRS offer several additional indirect advantages to investors. First, it is expected that IFRS should
induce higher information quality which, in turn, should reduce the risk of equity investment and the risk to lessinformed (naive) investors due to adverse selection. Theoretically, therefore, IFRS should lead to a reduction in
firms costs of equity capital, which would increase share prices, and make new investments more attractive,
ceteris paribus. Another indirect advantage of IFRS is the potential improvement in transparency and usefulness
of financial statement information in contracting between firms and other stakeholders, notably lenders and
managers (Watts, 1977; Watts and Zimmerman, 1986). Increased transparency causes managers to act more in
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the interests of shareholders. In particular, timely loss recognition in the financial statements increases the
incentives of managers to attend to existing loss-making investments and strategies more quickly, and to
undertake fewer new investments with negative net present values (Ball, 2001; Ball and Shivakumar, 2005).
The increased transparency and loss recognition timeliness promised by IFRS therefore could increase the
efficiency of contracting between firms and their managers, reduce agency costs between managers and
shareholders, and enhance corporate governance. The potential gain to investors arises from managers acting
more in their (i.e., investors) interests. In other words, the increased transparency and loss recognition
timeliness promised by IFRS could increase the efficiency of contracting in debt markets - between firms and
lenders - with potential gains to equity investors in terms of reduced cost of debt capital.
2.2.2
Prospective contrarian effects
It will be presumptuous to think that uniform financial reporting standards do not impose constraints that
putatively constitute disadvantages to both preparers and users of accounting information. Arguments against
uniform rules as embodied in IFRS in a voluntary setting are legion. First, it is not clear that uniform financial
reporting quality requires uniform accounting rules (the one size fits all) (Ball, 2006). Uniformity in the eyes
of the user could require accounting rules that vary across firms, across locations and across time. Since firms
differ on myriad dimensions such as strategy, investment policy, financing policy, industry, technology,
capital intensity, growth, size, political structure/scrutiny, and geographical location, the types of transactions
they enter
into also differ substantially. Countries differ in how they run their capital, labour and product markets, and in
the extent and nature of governmental and political involvement in them. To the extent that these differences
exist, it is yet to be seen if a unique optimum set of rules for all will receive universal acceptance and
application.
Second, as is widely known, to develop a fully detailed set of accounting standards to cover every feasible
contingency is a costly venture, so standards are not the only way of solving accounting method choices. Some
type of functional completion is required (Ball, 2006). For example, under principles based accounting,
general principles rather than detailed standards are developed in advance and then adapted to specific situations
with the approval of independent auditors. It is, therefore, not optimal for all accounting choices to be made
according to uniform standards. The third reason, that firms and/or countries using different accounting methods
might not fully internalize the total costs imposed on others due to lack of comparability, does not have that
property. It, therefore, provides a rationale for mandating uniformity. Fourth, there appears to be some concern
that many countries that claim to be converging to IFRS may never get to 100% compliance. It is argued that
most reserve the right to carve out selectively or modify standards they do not consider in their national interest,
an action that could lead to incomparability the very issue that IFRS seek to address (AICPA, 2008).
Fifth, a potential challenge for investors is the effect of IFRS on their ability to forecast earnings. One school of
thought holds that IFRS will create better accounting standards and thus make reported earnings less noisy and
more accurate, hence more value relevant. The reasoning is that managers in low-quality reporting regimes
(like Nigeria and Sub-Saharan African countries) are able to smooth reported earnings to meet a variety of
objectives, such as reducing the volatility of their own compensation, reducing the volatility of payouts to other
stakeholders (notably, employee bonuses and dividends), reducing corporate taxes, and avoiding recognition of
losses (Ball et al., 2000). In contrast, earnings in high-quality regimes are more informative, more volatile, and
more difficult to predict.
The sixth challenge of IFRS relates to the costs of adoption. These costs include staff training and education of
personnel on how to prepare financial statements using IFRS principles (Nobes, 2006). A small company would
feel the impact of its country's adoption of IFRS the same way a large company would feel. However, small
businesses do not have enough resources at their disposal to implement the changes and train staff. This results
in smaller companies bringing in accountants or other outside consultants to help effect the changeover. Thus,
smaller companies are more likely to bear more of the financial burden than larger ones in IFRS convergence
(Johnson and Leone, 2008). The transition cost implication may even be more in developing economies like
Nigeria, with weak physical infrastructure to support seamless convergence.
The seventh disadvantage relates to the interesting qualities of information (ibid). This is a situation in which
accounting standard setters may think they can improve the usefulness of financial statements by reducing the
number of permissible accounting alternatives. But those choices may reveal their secrets. A company that
chooses the accelerated over the straight-line method of depreciation reveals the higher degree of confidence its
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managers have in the companys future. How else could it credibly reveal or signal such information to
investors? Thus, the uniformity code of belief potentially ignores the signaling value of such choices.
Furthermore, the advantage of academic and professional freedom may be lost with the full acceptance and
adoption of IFRS. Overcoming resistance from both academics and practitioners will be hard, as they are used to
local accounting standards. The IFRS have shifted the focus of accounting education from preparing what
professionals think as the best way to deal with any given event or transaction to telling professionals what the
rulebook says (Ball, 2006). When the effect of standards on the attitudes of corporate managers and auditors is
considered, then standardized rules may sometimes make it difficult to make judgments. The standards laid out
for the treatment of particular issues might not be the best for a manager in the problem he is facing in his firm.
Under the IFRS, the manager is fenced in, with no exit route for alternative accounting methods.
2.2.3
A summing up of potential economic consequences of IFRS adoption in DLDCs
Accounting choices like economic choices matter and hence they have economic consequences. The concern
about the economic consequences of accounting policy choices began in the 1970s when the accounting
profession, notably the American Accounting Association (AAA), became aware of the increasing influence of
external forces in the standard-setting process (Zeff, 1978), or the economic impact of accounting standards
(Watts, 1977). The economic consequences argument raises two major issues. First, it raises the consciousness
of policy makers (government, regulators and congress committees) about the possible adverse consequences of
proposed or extant accounting standards. Second, it raises an obligation on the part of accounting standard
setters to take into explicit consideration the possible adverse economic consequences of proposed
accounting standards. Both of these concerns are strongest where the economic consequences are thought to be
significant and widespread (Zeff, 1978).
A number of studies have examined the economic consequences of the adoption of IFRS, with indicative
evidence that IFRS adoption generally (a) improves quality of accounting information (Barth et al., 2008), and
(b) reduces cost of equity capital (Daske et al., 2008; Li, 2010), even as their effects seem to vary by country
and firm. Previous studies have largely focused on developed countries, with little known about the
consequences of IFRS adoption in DLDCs (see, Lin, 2012). While a number of studies, such as Doidge et al.
(2004), have suggested that IFRS adoption holds significant economic consequences for DLDCs, empirical
evidence has been relatively sparse. A largely unexplored praxis is how IFRS will benefit Africas
economic development. Putatively, will IFRS contribute to or hamper African countries economic
development? Exploratory attempts to fill this lacuna in Africa include the works of Herbert (2010), Bova and
Pereira (2012), Lin (2012), Madawaki (2012), and Herbert et al. (2013).
Lins (2012) discussion of the empirical work of Bova and Pereira (2012) offers a three-way analysis of the
economic consequences of adopting IFRS in DLDCs. In the main, he argues that IFRS are a good deal more
significant and challenging for DLDCs than is commonly realized. In the main, because of the greater potential
growth opportunities of DLDCs, they have greater incentives for better or improved information environment
which will prospectively mitigate information asymmetry between firms and foreign investors.
2.3
Obstacles to IFRS Adoption in Nigeria
The challenges to IFRS adoption present opportunities for massive education and training of accountants,
auditors, financial analysts, regulators, and all direct stakeholders in financial reporting. Apart from immediate
changes in accounting curriculum in tertiary institutions offering accounting, increased seminars and workshops,
as well as staff development programmes are critical awareness enhancement processes to a speedy
development of IFRS convergence in Nigeria, and indeed any country. Intensification of IFRS education and
creating proper awareness about the importance of IFRS to the economy will facilitate the rate at which market
participants will embrace, transit, and implement it. Creation of awareness should start by making IFRS
education compulsory in the curriculum of students both in colleges and universities. Training accountants,
auditors, financial analysts, valuation experts through seminars, conferences will enlighten the mind of
practitioners and lead to a successful implementation.
The large accountancy firms have not been of a great help in the training and education for IFRS preparation in
Nigeria. For example, during interactions with some bankers as part of developing the topical interest, two
things became apparent. The first was the absence of systematic awareness of IFRS. The second issue was that
most of the bankers studied neither accountancy nor banking and finance but were graduates of engineering,
law, agricultural science and other unrelated courses. This is a clear case of lack of knowledge by staff of a
critical
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sector as the banking industry. This observation was not only unique to the banking sector. Interaction with
students of other universities reveals the absence of knowledge of IFRS. Although a number of large foreign
accountancy firms, like Deloitte Touch Tohmatsu, have been offering e-learning modules on IFRS on their
websites upon registration, these cannot be a systematic national approach to sustain knowledge development of
IFRS. Again, consistent interpretation and providing legal backing and consequences for non-compliance will
facilitate implementation of IFRS in Nigeria.
2.4
Review of Prior Studies
Since the evolution of IFRS, several affirmative arguments have been canvassed. For example, Ewert and
Wagenhofer (2005) offer strong arguments in support of the need to tighten accounting standards to reduce the
level of earnings management and improve reporting quality. Others, such as Armstrong et al. (2007), Covrig et
al. (2007), aver that IFRS make it less costly for investors to compare firms across markets and countries. They
suggest that even if the quality of corporate reporting itself does not improve, it is possible that the financial
information provided becomes more useful to investors. Earlier studies, such as Anderson (1993), present the
advantages of convergence to a global accounting system. Buchanan (2003), Choi et al. (1999), and Beke (2010)
address the factors that influence the development of an international accounting system and the harmonization
process.
The view of Nobes and Parker (2008) towards harmonization is that even if a number of accountants from
different countries or the same country are given the same transactions from which to prepare a financial
statement, they will not produce identical statements. Although they follow the same rules, no set of rules covers
every eventuality or is prescriptive to the minute details and they offer reasons for obstacles to harmonization
(ibid. p. 77). Other researchers, such as Saudagaran (2001) and Dunn (2002), have examined the obstacles to
harmonization of accounting, including cultural and political barriers. These studies provide affirmative
arguments about the benefits of the harmonization process, such as improving the comparability of international
accounting information, enabling the flow of international investments, and making consolidation of divergent
financial reporting more cost-effective.
However, these studies also acknowledge that the most severe impediments to harmonization and convergence
in global accounting standards are the extent of differences in accounting policies and practices of
various countries, lack of vigilant, effective standard-setting bodies in some countries, and diversity in political
and economic factors worldwide. Another reason for differences in accounting principles between certain
nations identifies with variations in their level of economic development, in the legal system, in the taxation
system, in the intensity of capital market, in the level of inflation, in the typical methods of financing an
enterprise, in the shareholder background, and in the political and cultural traits. These determine the
regulatory aims and philosophy behind them (Beke, 2010).
Studies reporting improvements in financial reporting quality following voluntary IFRS adoption include Barth
et al. (2007; 2008), and Gassen and Sellborn (2006). Barth et al. (2007) examine accounting quality before and
after the introduction of IFRS for a sample of 327 firms (1,896 observations) that voluntarily adopted IAS
between 1994 and 2003. They found evidence of lower earnings management, higher value relevance and more
timely recognition of losses after the introduction of IFRS, compared to the pre-transition local GAAP
accounting. Their results are consistent with higher accounting quality after the IFRS introduction across
countries.
Daske et al. (2007) examined the economic consequences of requiring IFRS for financial reporting worldwide,
and found an increase in market liquidity and equity valuations around the time of the mandatory introduction of
IFRS. However, evidence of the effect on firms cost of capital is mixed. Furthermore, Daske et al. (2008)
reported that capital market benefits were more pronounced in countries with strict enforcement regimes and for
firms that voluntarily switched to IFRS, but less pronounced for countries where local GAAP was closer to IFRS
or where IFRS convergence strategy was in place, and in industries with higher voluntary adoption votes. The
IFRS is expected to improve the comparability of financial statements, strengthen corporate transparency, and
enhance the quality of financial reporting. Armstrong et al. (2007) argue that IFRS reporting makes it less costly
for investors to compare firms across countries and capital markets. Covrig et al. (2007) suggest that
convergence toward IFRS reporting can facilitate cross-border investment and the integration of capital markets.
Prior studies on convergence either investigated market reactions to several events regarding the European
Unions movement toward mandatory IFRS reporting or examined the impact of mandatory IFRS adoption in
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financial reporting in different countries. Results of market event studies of mandatory IFRS reporting are mixed
and inconclusive. For example, Comprix et al. (2003) find insignificant but negative market reaction to four key
events associated with mandatory IFRS reporting for EU firms. Armstrong et al. (2007) report a positive
(negative) market reaction to 16 events that increase (decrease) the likelihood of IFRS adoption from 2002-2005
with more positive effects for firms with high pre-adoption information asymmetry or lower quality pre-adoption
information environments and firms that are domiciled in common law countries.
Some studies (e.g., Lang et al., 2006 and Leuz, 2006) support anecdotal evidence (e.g., KPMG 2006, 2007;
E&Y
2007a, b) which suggests that IFRS financial reports are not only affected by home-country institutions, but also
retain a strong national identity. Application of accounting standards is affected by unique cultural and economic
factors of the country in which the standards are applied (Smith, 2008). Daske et al. (2007) find that serious
IFRS adopters experienced significant declines in their cost of capital and substantial improvements in their
market liquidity compared to label adopters. Furthermore, IFRS can be perceived as being designed for large
corporations and detrimental to the reporting needs of smaller firms. Recent studies (Barth, 2008; Ball, 2006;
Nobes, 2006) examine the feasibility of convergence to IFRS, including the potential advantages of producing
more accurate, timely, and complete financial information, eliminating international differences in accounting
standards, and removing barriers to the global capital markets. Barriers to IFRS convergence addressed in these
studies are the persistence of international differences under IFRS, the existence of market, legal, and political
differences, and IFRS enforcement issues (Smith, 2008). Barth (2008) identifies challenges and opportunities
created by global financial reporting for the education and research activities of U.S. academics.
2.5
Research Questions and Hypotheses
Corporate Governance has been found to be a global frontier issue in corporate management, more so in
developing economies with weak regulatory systems (Herbert and Tsegba, 2011). Effective corporate
governance requires accurate and reliable financial information (Judge et al., 2010). The provision of accurate
and reliable information has historically followed national standards, where each nation has developed and
pursued its own financial standards. However, since the 1980s, in particular, the imperatives of globalization and
advances in information communications technology (ICT) have increasingly integrated national economies as
well as consolidated financial markets into a global market. As a consequence, the need for a common set of
financial standards became not only desirable but imminent. The upshot of the concern for a uniform financial
reporting framework gave rise to the movement towards harmonization of international financial reporting
standards throughout the global economy.
While there has been considerable research on the effects of IFRS adoption, there has been relatively little or no
systematic study as to the antecedents of IFRS adoption in Nigeria. In other words, why did Nigeria undertake a
wholesale transition to IFRS from January 2012, while other countries have partially adopted or continued to
resist them? Put differently, why did Nigeria embrace IFRS without invoking socioeconomic awareness, both
from pedagogic and professional development points of view?
This survey seeks to offer empirical evidence on the consequences (obstacles and benefits) of IFRS adoption in
Nigeria. It also addresses issues related to the attitudes of Nigerian about IFRS adoption. These objectives are
accomplished through an evaluation of opinions and insights from a sample of accounting academics (students
and lecturers) and practitioners regarding the obstacles to, benefits of, and attitudes to uniform global financial
reporting framework. Specifically, the study seeks to provide answers to the following research questions (RQ):
RQ1:
RQ2:
RQ3:
Do Nigerian academics and practitioners have different perspectives about the obstacles towards IFRS
adoption?
Do Nigerian academics and practitioners have different perspectives about the benefits of IFRS
adoption?
Are there significant differences between the attitudes of Nigerian academics and practitioners towards
IFRS adoption?
Research Hypotheses
The above research questions give rise to a number of hypotheses which are stated in the null form and related to
each question. RQ1 results to the following three hypotheses:
H01:
There are no significant differences in the perceptions of Nigerian accounting lecturers and students
about the obstacles towards IFRS adoption.
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H02:
H03:
www.iiste.org
There are no significant differences in the perceptions of Nigerian accounting lecturers and practitioners
There are no significant differences in the perceptions of Nigerian accounting students and practitioners
RQ 2 gives rise to the following three hypotheses:

H04:
There are no significant differences in the perceptions of Nigerian accounting lecturers and students on
the benefits of IFRS adoption.
H05:
There are no significant differences in the perceptions of Nigerian accounting lecturers and practitioners
on the benefits of IFRS adoption.
H06:
There are no significant differences in the perceptions of Nigerian accounting students and practitioners
on the benefits of IFRS adoption.
Similarly, RQ 3 gives rise to the following three
hypotheses:
H07:
There are no significant differences in the attitudes of Nigerian accounting lecturers and students
towards IFRS adoption.
H08:
There are no significant differences in the attitudes of Nigerian accounting lecturers and practitioners
H09:
There are no significant differences in the attitudes of Nigerian accounting students and practitioners
3.
Research Methodology
This section describes the methods and procedures adopted in this study. It specifies the research design, the
source of the data, and the procedures adopted in data analysis.
3.1
Research Design
This study is exploratory and adopts a quantitative approach in seeking answers to the research questions. We
adopt a survey approach through a set of questionnaires which were designed to elicit opinions about the
perceptions on the consequences (obstacles and benefits) of IFRS adoption in Nigeria. Another aim of the survey
is to ascertain the attitudes of Nigerian accounting academics (students and lecturers) and practitioners towards
IFRS adoption.
3.2
Population and Sample
The population for this study included academics and practitioners in Abia and Imo States. The choice of these
two states was based on reasons of logistics and resources (both in terms of time and money). Interactions with
some lecturers and students from the universities located in these two states (Federal, State and Private) as well
as with practitioners therein provided anecdotal evidence that was somewhat convincing about the depth of their
knowledge about the issues raised therein. Thus, it is not expected that the conclusions reached in this study will
be markedly different from those of a wider population of similar respondents, although this does not foreclose a
broader coverage of the dimensions to enrich our understanding of IFRS issues.
In this study, the term accounting academics is used in the inclusive sense to denote accounting lecturers and
students. Also, the term practitioners is used inclusively to connote accountants, and auditors in practice (both
in the private and public sectors) as listed in the registers of the Institute of Chartered Accountants of Nigeria
(ICAN) and the Association of National Accountants of Nigeria (ANAN) as of 2010. This register is an
authentic compilation of members of the two recognized accountancy bodies, which means that the practitionerrespondents are all professionally qualified and hold professional opinions on the issues raised in the
questionnaire. The sample comprised 200 respondents who are accounting students and lecturers from the
Nigerian University System, particularly students and lecturers from Veritas University and Abia State
University, accountants and auditors in practice, from the offices of the Accountants-General, Auditors-General,
Federal Inland Revenue Service, Union Bank, Fidelity Bank, and Ecobank. For purposes of questionnaire
administration and subsequent analyses, there were altogether three sample groups: students, lecturers and
practitioners.
A total of two hundred (200) questionnaires were administered, with each dyad having 100 questionnaires to
complete. Every effort was made to garner as many responses from the large population of students and lecturers
in the universities as would be available from the practitioners in the states. Furthermore, it is expected that the
more the sample size of academics from different universities the greater the chances of reducing any potential
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bias in their responses. The random sampling technique was employed in administering the questionnaire to
ensure that every unit in the population had a chance of being selected in the sample.
3.3
Sources of Data
Data for this study is obtained from a sample of Nigerian academics (accounting and auditing lecturers and
students) and practitioners (auditors, accountants, and financial analysts) located in Imo and Abia states of
Nigeria. The views of academics and practitioners are essential in assessing the perceptions of Nigerians
regarding IFRS adoption in certain respects. Such a survey is needed because (a) these critical stakeholders
(financial academics and practitioners) concerns on the relevance of extant IFRS research, and (b) their views on
IFRS research agenda might help to suggest new emphasis and new directions for seamless country adoption.
3.4
Instrument of Data Collection
The studys main instrument for data collection is the questionnaire. The questionnaires were adopted, mutatis
mutandis, from those of Rezaee et al. (2010) and Moqbel and Bakay (2010) and distributed to accounting
academics (lecturers and students) and practitioners (accountants, auditors, etc). The questionnaire was designed
to measure the perceptions of the respondents on a number of issues related to IFRS adoption, such as the
readiness, obstacles, benefits, and attitudes towards implementation of IFRS. The questionnaire consists of
closed type questions which are easier to answer, process, and analyze. The questions are made-up of Likert
scales: ("strongly agree," to "strongly disagree."), numerical rating scales, etc. They were partitioned into two
main sections. The first section, demographics, contains background information, socio-economic status,
education, etc. The second section contains attitudinal questions; covering respondents opinions, attitudes,
values and beliefs on their perceptions on, readiness, obstacles, benefits, and attitudes towards the adoption of
IFRS in Nigeria.
It is presumptuous to group the knowledge base and status of junior, senior and graduate level accounting
students (or any subject for that matter) with that of PhD students and lecturers, as was done in the study by
Moqbel and Bakay (2010) where all were grouped as academics. In this study, we identified this knowledge
differential while acknowledging their generic appellation as academics. Thus, we defined academics in an
inclusive way to incorporate students and lecturers, as in the US study, but instead of having a two-sample study
as in the US, we decomposed academics into lecturers and students. Thus with practitioners we have a threesample study, occasioning the use of Kruskal-Wallis test.
There are reasons for replicating studies. Essentially, IFRS research is important to the future of the world
economy far too important to be limited arbitrarily to the findings of one national study (Herbert and Wallace,
1996). Specifically, we aver that different national contexts of IFRS may help to define the status of education
and practice in accounting and financial reporting: they help to identify global IFRS topics of interest and
support globalization of IFRS curricula and practice. They also help to build a literature on comparative national
issues on IFRS, which are presently scanty although there is a growing literature on international financial
reporting. In the categorization of academics, this study is similar to the US ones, except that their definition of
academics was limited.
3.5
Techniques for Data Processing and Analysis
The hypotheses of this study were tested using appropriate statistical tools, such as Frequency analyses,
descriptive statistics and Kruskal-Wallis (K-W) and Chi-Square tests. The K-W test is a nonparametric test used
to compare three or more samples, as in this study. It is used to test the null hypothesis that all populations have
identical distribution functions against the alternative hypothesis that at least two of the samples differ only with
respect to location (mean or median), if at all. It is analogous to the F-test used in analysis of variance
(ANOVA). While analysis of variance tests depend on the assumption that all populations under comparison are
normally distributed, the K-W test places no such restriction on the comparison (Easton and McColl, 2012).
While the Chi-Square test of independence was used to test for differences in responses involving categorical
dependent variables for the between subject analysis, the K-W test was used to examine differences in responses
in the ranked data. The K-W test was also performed to investigate demographic differences in the responses.
The SPSS Version 20 was used to analyze the data and test the hypotheses.
4.
Results and Discussions
This section presents the data, analysis and interpretation of results.
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Table 1. Summary of Questionnaire Administration

Nature of Organization No. of Questions Sent
No. Returned
Auditor-Generals Office
20
14
Accountant-Generals Office
20
9
Federal Inland Revenue service
20
10
Union bank plc
20
5
Eco bank
20
3
Fidelity bank
20
5
Abia State University
40
17
42.5% Veritas University
40
40
100% Total
200
103
51.5%
%
70%
45%
50%
25%
15%
25%
Table 1 shows that 103 responses were received out of 200 questionnaires administered, representing 51.5%
response rate. Fifty-seven responses (71.25%) were received from academics (lecturers and students) and 46
(38.3%) from practitioners. The overall response rate (51.5%) as well as the response rates for both academics
and practitioners were quite impressive and compares very favourably with most survey studies (see, Rezaee et
al., 2010; Moqbel and Bakay, 2010). Table 2 presents the characteristics of the respondents. The respondents
are fairly balanced in terms of gender. More than half of the practitioners either work in professional
accountancy firms or in banks, etc. In all, the respondents seem to be familiar with the issues and challenges of
IFRS adoption.
Gender
Male: (55) 53.9%
Female: (47) 46.1%
1 Missing
Age (Years):
Less than
20:(14) 13.6%
21 -30: (39) 37.9%
31 40: (22) 21.4%
Over 40: (28) 27.2%
Table 2 - Characteristics of Sample Respondents (N = 103)

Occupation:
Students: (43) 41.7%
Lecturers: (18) 17.5%
Practitioners:(42) 40.8%
Work experience (Yrs):
Industry Classification:
1 4: 19.35%
Banking, Finance, Insurance, etc.: 23.5%
5 -10: 30.64%
Professional Services: 32.35%
Over 10 yrs: 50.01%
(Accounting, Auditing, Consultancy, etc.
Public Aministration: 44.15%
(Federal, State, Local Government)
4.1
Obstacles towards IFRS Adoption
One of the objectives of the research is to determine whether academics and practitioners have different
perspectives regarding the severity of the obstacles towards IFRS adoption. Simply put and given their level of
familiarity, do Nigerian academics (students and lecturers) and practitioners believe that IFRS adoption will face
severe obstacles? The answer is provided through a comparative frequency analysis as shown in Tables 3A and
B below.
From Table 3A, the ranking of average responses of students, lecturers and practitioners indicates that the four
major obstacles to IFRS adoption in Nigeria, in severity order, are: (i) Lack of education, understanding and
experience by preparers of financial reports with the use of IFRS; (ii) Lack of coverage of IFRS in financial
accounting/ auditing textbook; (iii) Initial cost of adoption; and (iv) Transition plan and issues pertaining to
IFRS.
Within the respondent groups, students perceive the following as the most critical factors simultaneously
militating against IFRS adoption: initial cost of converge, lack of sufficient involvement of global regulators in
the IASB standard setting process, and lack of education, understanding and experience by preparers of financial
reports with the use of IFRS. On the other hand, accounting lecturers and practitioners seem to have a consensus
in the factors that severely impede IFRS adoption.
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Table 3A: Obstacles to Adoption

Please indicate the extent of Students
Lecturers
severity of the following in a move
towards complete convergence to
IFRS (1=Not Severe; 5=Very
Severe)
Not
Not
Severe
Severe Severe
Severe
Practitioners
Not
Severe
Severe
Rank
Avg.
K-W
ChiSq..
.000
.000
Initial cost of convergence

10.5%
89.5%
10.5%
89.4%
28.2%
71.8%
3
Required changes in auditing 26.3%
73.7%
15.8%
75.2%
26.1%
73.9%
6
standard.
Perceived uncertainties about 28.9%
71%
21.1%
79%
30.4%
69.5%
7
.000
IFRS.
Lack of sufficient involvement of 10.6%
89.5%
15.85
84.2%
23.9%
76.1%
5
.000
global regulators in the IASB
standard setting process.
Transition plan and issues 23.7%
76.4%
10.6%
89.5%
15.9%
84%
4
.000
pertaining to IFRS.
Lack of education, understanding 10.6%
89.5%
0%
100%
15.1%
84.8%
1
.000
& experience by preparers of
financial reports with the use of
IFRS.
Lack of coverage of IFRS in 18.4 %
81.6%
5.3%
94.8%
17.3%
82.6%
2
.000
financial accounting textbooks.
Isolating the test of difference regarding the severity of obstacles towards IFRS adoption between students and
lecturers, students and practitioners, and lecturers and practitioners, Table 3B reveals significant differences
between students and lecturers as well as between accounting students and practitioners, but no significant
differences between lecturers and practitioners.
Table 3B: Descriptive Statistics of Obstacles to IFRS Adoption
Students
Lecturers
K-W
Practitioners
Chi-Sq
Mean
Std Dev. Mean
Std
Mean
Std
Response
Response
Dev.
Response
Dev.
Initial cost of convergence
3.0000
.6172
4.1667
.9236
3.8095
1.0178
.000
Required changes in auditing
3.1860
.8239
3.8333
1.0981
3.7857
1.0009
standards
.007
Perceived
uncertainties
3.4186
.6980
3.6111
1.3779
3.7143
1.1106
surrounding IFRS
.404
Lack of sufficient involvement of
global regulators in the IASB 3.0698
.8836
4.0000
.9701
3.7143
.7742
.000
standard setting process
Transition plan and issues
3.2791
.7661
4.0556
.7254
3.8000
.6076
pertaining to IFRS
.000
Lack of education, understanding
& experience by preparers of
3.0930
financial reports with the use of
IFRS
Lack of coverage of IFRS in
3.0698
financial accounting textbooks
.7812
4.4444
.5113
4.0000
.9627
1.055
4.3889
.7775
4.0714
.8942
.000
.000
These findings largely corroborate those of Moqbel and Bakay (2010). One important implication of these
results is that it is instructively advisable for individuals and firms to utilize every opportunity to avail
themselves of IFRS learning materials and training programmes in order to mitigate the lack of education and
understanding and lack of coverage of IFRS in extant accounting/auditing curriculum. Nigeria and Nigerian
companies can also appropriate the learning experience of other countries such as South Africa and the European
countries. An ideal preparatory ground would have been for Nigerias tertiary educational institutions offering
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accounting, and professional accountancy bodies to embed IFRS into their curriculum as a prelude to the
countrys convergence to IFRS, similar to the U.S., rather than the hasty announcement when little is known
about it and the countrys accounting professionals are ill-equipped.
4.2
Benefits of IFRS Adoption
As for the perceived benefits of IFRS adoption, the combined results listed in order of importance as represented
by the mean coefficient of responses in Table 4 are that IFRS: create uniformity in global financial reporting
including audit reports; increase global comparability promoting a more informed global marketplace; enable
management and auditors to exercise more professional judgment; and position IFRS to be the globally accepted
accounting language. The results of differences in responses between the three groups are however not
statistically significant for all the perceived benefits of IFRS.
Table 4: Perceived Benefit of convergence to IFRS
(1 = Most Unimportant to 5 Very Important)
Students
Lecturers
Practitioners
Please rank the importance of the
perceived benefit of convergence to IFRS
as a single set of accounting standard by
ticking
1 to 3 according to your
assessment of each items level of
importance
Minimize barrier to global competition
for capital
Increase global comparability promoting a
more informed global marketplace
Position IFRS to be the globally accepted
accounting language
IFRS enables management and auditors to
exercise more professional judgment
IFRS create uniformity in global financial
reporting including audit reports
Mean
Response
Std
Dev.
Mean
Response
Std
Dev.
Mean
Response
Std
Dev.
3.3953
.6597
4.1111
.9634
4.0476
.7636
3.5814
.6980
4.5556
.5113
4.3810
.6968
3.4651
.7020
4.3889
.5017
4.1905
.5055
3.5581
.7004
4.2222
.9428
4.4286
.5474
3.6977
.8319
4.5000
.5145
4.4762
.8036
K-W
Chi-Sq
.000
.000
.000
.000
.000
4.3
Perceived Attitudes towards IFRS Adoption
To further gain an insight into the attitude of Nigerians towards IFRS adoption and thus consolidate the findings
of this study, we obtained an overview of the respondents level of agreement with a number of issues
surrounding IFRS adoption.
Table 5: Descriptive Statistics of Perceived Attitudes of Respondents
Students
Lecturers
Practitioners
K-W
Please tick () your level of agreement Mean
Std
Mean
Std Dev. Mean
Std
Chi-Sq
Dev.
Response
Response
Dev.
with the following statements: (1 = Response
Strongly Disagree to 5 = Strongly
Agree)
I have an interest about the IFRS
3.4651
.6305
4.5000
.51450
4.1667
.5809
.000
I know the IFRS well
3.7381
4.691
3.8889
.75840
3.8810
.7392
.973
Many companies are preparing well to
.003
3.0233
.7396
3.6667
.90749
3.5714
.8595
adopt the IFRS
IFRS adoption will affect financial
.000
3.3488
.6860
4.2222
.73208
3.8810
.8025
performance
IFRS adoption will affect operating
.000
3.2326
.6844
4.2778
.75190
3.9048
.7905
performance
IFRS will affect stakeholders such as
.000
3.3721
.6181
4.1111
.75840
4.1190
.7715
investors or shareholders
IFRS must be offered as a core
.002
3.5814
.6980
4.3333
.76696
4.0714
.9472
curriculum in tertiary education
Will you be willing to take a course in
3.5814
.7314
3.9444
.93760
4.0000
.8264
IFRS if one is offered in the university?
.048
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Results presented in Table 5 indicate that both lecturers and practitioners strongly agree, with a mean response
over 4.00, that: (1) they have interest about the IFRS; (2) IFRS must be offered as a core curriculum in tertiary
education; and (3) IFRS will affect stakeholders, such as investors or shareholders. While students were in
agreement with the above items, their extent of agreement was not as strong as with those of lecturers and
practitioners except for the propositions that seek to advance the knowledge base of IFRS. They slightly agree
that IFRS must be offered as a core curriculum in tertiary education, just as they are willing to take a course in
IFRS if one is offered in the university (mean response of 3.58). The three groups of respondents are united in
their ambivalence towards, or slightly agreement with, the level of preparation to adopt the IFRS, with a mean
range of 3.02 for students, 3.67 for lecturers, and 3.57 for practitioners.
5.
Summary and Conclusions
This section presents the summary, conclusions and limitations of the study, and the policy implications in the
form of recommendations. The section concludes with suggestions for further research.
5.1.
Summary
Despite her announcement to fully adopt IFRS with effect from January 2012, Nigerias implementation
readiness is still uncertain and remains an empirical issue. A more worrisome development is the haste with
which Nigeria adopted IFRS without consultation with key stakeholders, such as tertiary institutions,
professional bodies and the business community. The economic consequences objective of this study was
evaluated through the obstacles to, and the benefits of IFRS adoption in Nigeria. Closely related was the
assessment of the attitudes of academics and practitioners, towards the subject matter. In order to achieve this
objective, a comparative assessment of the perspectives of Nigerian academics and practitioners regarding the
phenomenon of interest was pursued.
The sample respondents were accounting students and lecturers from the Nigerian University System,
particularly students and lecturers from Veritas University and Abia State University, and accountants and
auditors in practice. The practitioners were from the offices of the Accountant-General, Auditor-General,
Federal Inland Revenue Service, and banks such as Union Bank, Fidelity Bank, and Eco Bank. Data was
collected through questionnaire administration to a sample of accounting students, lecturers and practitioners,
and secondary data drawn from the population within the geographic context defined earlier. We examined
three research questions on the obstacles to, benefits of, and attitudes towards IFRS adoption using frequency
analysis and Kruskal-Wallis and Chi-square tests.
The respondents found the following as the major obstacles to IFRS adoption in Nigeria, in severity order: (i)
lack of education, understanding and experience by preparers of financial reports with the use of IFRS; (ii) lack
of coverage of IFRS in financial accounting/ auditing textbook; (iii) initial cost of adoption; and (iv) transition
plan and issues pertaining to IFRS. The test of difference in the severity of consequences of IFRS adoption
between each of the three dyads, representing hypotheses H01 to H03 accounting lecturers and students,
accounting lecturers and practitioners, and accounting students and practitioners - revealed significant
differences between students and lecturers as well as between students and practitioners, but not between
lecturers and practitioners.
As for the benefits of IFRS adoption, the three groups of respondents reported the following, in order of
importance: (a) creating uniformity in global financial reporting including audit reports; (b) increasing global
comparability and promoting a more informed global marketplace; (c) enabling management and auditors to
exercise more professional judgment; and (d) positioning IFRS to be the globally accepted accounting language.
The results of differences in responses between the three groups, representing hypotheses H03 H06, were
however not statistically significant for all the perceived benefits of IFRS.
In terms of perceived attitudes towards IFRS adoption, while opinions regarding the key issues are diverse,
respondents, both academic and practitioner, overall believe that: (1) effective convergence to IFRS would be
valuable to preparers, users, auditors, analysts, and standard setters; (2) an appropriate framework for the global
acceptance and enforcement of IFRS should be agreed on, offering optional transition; and (3) a proper plan to
convert all Nigerian companies to IFRS requires related training for management, auditors, and investors, along
with IFRS education incorporated into accounting curriculum.
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5.2
Conclusion
International Financial Reporting Standards (IFRS) have received global acceptance and have been adopted by
many countries, and are being considered by some, such as the USA. Nigerias adoption of IFRS ought to have
been prefaced by a systematic dialogue with critical stakeholders in order to establish an understanding of the
trajectories of convergence into one global financial reporting language. Comparability of financial reporting
which IFRS offer is the underlying rationale for convergence towards a single set of standards. The expectation
that the efficiency and competitiveness of global financial markets is facilitated by convergence to IFRS must be
circumscribed, strengthened and validated by systematic empirical investigation in different countries and
jurisdictions. This underscored the context of this exploratory study.
5.3
Limitations and Suggestions for Future Research
Every survey research is bound to be fraught with limitations. One of the limitations of this study relates to
homogeneity of the sample subjects. For example, the sample subjects in this study (accounting staff and
students, and accountants in practice), exhibit commonality of traits which may induce systematic biases in their
perceptions of the relevance of convergence to IFRS. Second and related, any random sampling of respondents
from a homogenous population is bound to induce bias in sampling procedures which may introduce response
biases. Third, questionnaire surveys are almost always faced with the possibility of a non-response bias as a
consequence of (a) non-return of some questionnaires, (b) incomplete return or non-usable responses, and (c)
late respondents (Herbert and Wallace, 1996). Thus, the presence of non-respondents to the questionnaire may
suggest non-response bias in the results, given that it is not known how non-respondents would have answered.
However, a test of non-response bias was undertaken by comparing late responses with early responses, as
suggested by Herbert and Wallace (1996) to determine any significant differences in the responses of early and
late respondents, and hence any potential bias in the responses, using the late responses as a surrogate for nonresponses (ibid). The results showed no significant differences in the responses of early and late returns.
Fourth, where a survey is constrained by a small-numbers sample size condition, there may be limitations on
account thereof. With respect to small-numbers sample size condition and the limitations associated therewith,
two kinds are discernible: ex ante and ex post small numbers sample sizes. Where a study population is
inherently limited, then the phenomenon of interest is bounded by natural selection. There is nothing the
researcher can do about the number of possible participants beyond increasing the response rate in order to
reduce bias and thus obviate the inferential liability or defect of the results. The researcher will hence be
obligated to either study the entire population where this is feasible or ensure a reasonable sample therefrom. Ex
post small numbers sample condition is researcher-induced through the research design and research techniques.
In effect, a relatively small sample size (of academics and practitioners) would evoke caution in the readers
interpretation of the results.
Fifth, the contextual limitation of this study to a relatively homogenous cultural setting institutions and
practices domiciled in Abia and Imo states of Nigeria may pose generalization problem. Further and wider
contextual considerations may be a fruitful avenue for further research. Also, future research may be warranted
even within other geographic contexts to validate or refute the findings of this study. This notwithstanding, this
study provides a useful incipient comparative analysis of the views of academics and practitioners on IFRS
adoption in Nigeria.
5.4
Recommendation and Policy Implications
This exploratory study is both significant and timely, even though Nigeria has adopted IFRS with effect from
January 2012. The study has thrown up reservations about certain obstacles towards IFRS adoption in Nigeria.
Additionally, there are other implementation issues of IFRS, such as differences between national GAAP (SAS
in Nigeria) and IFRS as well as the challenges and obstacles to IFRS adoption beyond the ones examined in this
study. Besides, the issues canvassed herein remain unresolved and warrant further empirical investigation.
Nevertheless, the results of this study compel policy dialogue with respect to inadequacy of adoption
plan/preparation and minimization of perceived obstacles to seamless transition to unified global financial
reporting architecture.
An important policy implication of this study is the urgency of accounting curriculum review in our tertiary
education system to incorporate IFRS and its implementation dimensions. Clearly, government at all levels,
financial regulatory agencies, professional accountancy bodies, private and public companies and institutions,
and accountancy firms all need to fast-track IFRS education in order to boost the acquisition of IFRS knowledge
and competences.
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